Company’s are aiming for a leaner procurement / sourcing team, but are seeking more savings. Group Purchasing Organizations can serve as an extension of your team and identify savings opportunities.
A Group Purchasing Organization leverages the spend of member companies to achieve price and service levels superior to what individual companies can achieve on their own. Unsure if a GPO is right for you? Check out our 8 benefits of becoming a member.
1. Item Level Savings
While an individual company may find a decent amount of savings on their own, it shadows in comparison to the savings one can gain by joining a GPO. Group purchasing organizations combine the purchasing power of different businesses to negotiate better discounts that result in an item level price not attainable by most single companies.
2. Free Membership
Not all group purchasing organizations provide free membership, so finding one that does is an advantage. It not only benefits the member, but it also benefits the GPO to have free memberships; supply partners are willing to extend discounts and additional service levels to gain access to a GPO with a large network of members. When considering a GPO, look for one with free membership, a broad range of supply partners and substantial buying power.
3. Direct Relationship with Suppliers
Joining a GPO does not mean your connection with the supplier will be severed. GPO members will still receive deliveries straight from the supplier, the member will still be able to call on the supplier if any problems arise and still have the opportunity to meet in person to conduct account reviews.
4. Category Management / On-going Support
GPOs offer category management which provides aid in identifying and realizing savings throughout the tenure of an agreement. A GPO will keep its members current on offerings or service enhancements by having frequent reviews with suppliers to understand new services and approaches the supplier may be taking. However, while many buyers utilize GPOs to reduce the strain on themselves, GPOs are not meant to act as artificial barriers between the supplier and buyer.
The organizations that will benefit the most from a GPO are those that understand and welcome collaboration. When bringing together many different professionals, organizations are able to share best practices and exchange information. Bringing together different professionals in multiple industries with similar challenges and spends, allows members the opportunity to exchange sourcing tips, recent experiences and even horror stories with a group of peers.
6. Lower Purchasing Risk and Quality Service
GPOs strive for longevity when it comes to keeping members; because of this, the pressure to support the member is immense. In order to give members the best quality in suppliers, GPOs subject potential suppliers to a full vetting process which ensures the credibility and value of the supplier, in return the members have a lower purchasing risk. Working with suppliers that are simply the “cheapest” option and provide little overall value may harm a GPO’s standing.
7. Savings Beyond Price
Though a GPO’s main goal is to get members the most products for the most savings, that should never be a reason to ignore quality. The modern GPO encourages members to work with suppliers to identify qualitative – not just quantitative – improvements that will give them the best-in-class service. A GPO goes beyond initial savings and considers total cost of ownership, this can help with inventory reductions and process improvements.
8. Varying Services
There are many more services available depending on the GPO you decide to join. These services range from supply chain consulting, ecommerce solutions, to benchmarking, safety initiatives, revenue management, and technology assessments. Some less common offered services include: materials management consulting, materials management outsourcing, and revenue management.
The value a GPO offers is hard to deny. If your company is looking to partner with a GPO, spend time researching the available options to ensure a successful relationship.
Download our GPO checklist and find out if a group purchasing organization is right for you!